The Summer of Cheap(er) Gas, Happy Driving!
Get out the maps, tune up the car, and update the GPS software. It’s time to plan a summer road trip! The Energy Information Administration, which is also known affectionately by the acronym, EIA, has happy news; the price of gasoline will be about a dollar per gallon cheaper this summer than last.
You may have noticed that for a brief while it was fashionable to write about the devastating effects of lower energy prices. Then one day the media woke up to the smiling faces of people who were paying less to heat their homes and fill up their cars. Truckers were spending less on long hauls. These people, the media learned, were happy because they had extra money in their pockets. Money it seems that most of these people were putting into their savings.
And it wasn’t just ordinary people who were happy. Business people were happy too. The people who work at National Funding, a company which provides financing options to small/ medium businesses, was so moved they put together a whole graphic celebrating the joy of lower energy prices that you can find on their website, titled “How Gas Prices Affect Small Business And The Economy“.
As a result, it is now okay for us to openly celebrate the good news of less pain at the pump. I won’t go into the details of the EIA’s forecast for the simple reason that the forecast is a national one meaning that their price forecast is skewed by states like California which has the highest per gallon prices and Gulf Coast states which tend to have the lowest. Which means you are likely to see a slightly different price in your area than is forecast by the EIA. But here is the money sentence in the report, “Based on this price forecast, the average U.S. household is expected to spend about $700 less on gasoline in 2015 compared with 2014, as annual motor fuel expenditures are on track to fall to their lowest level in 11 years.”
Ahhhh, what a relief that is!
Having now pumped you full of happiness I am going to take a little air out of the tires. So, let’s start with a simple qualifying statement from our friends at the EIA, who warn…
“Forecasts of crude oil prices and wholesale margins are uncertain, and any difference in actual prices or margins from EIA’s forecast would be reflected in the retail gasoline price.”
I actually like the way Tom Kloza puts it better. Tom is the Global Head of Energy Analysis at Oil Price Information Service.
“All measurements and predictions for oil prices are done with the precision of a chain saw cutting a man’s hair.”
He has a way with words, don’t you agree? OPIS owns the well known website, GasBuddy.com.
Kloza likes the analysis done by the EIA but adds that he sees demand being uneven. The word he uses is “lumpy”. Combine that uneven or lumpy demand with 90-million barrels of oil in storage waiting to be refined into transportation product and Kloza thinks it is very possible that some parts of the country might even seen gasoline selling below $2 a gallon.
His one caveat is this; a hurricane. Kloza notes that inventory levels of gasoline are only modestly higher now than they were before Katrina hit so if a strong storm should make land fall in late August, it would destroy the forecasts as several refineries could be damaged and taken off-line. However, August is many months away and just what might come or not come does not change the fact that we are now paying less for gas and diesel than we have since 2009.
So, what are you waiting for? Why contort yourself into the seat of an airplane when you can stretch out in the comfort of your car or SUV and see the USA from ground level? Get crazy and eat in a diner! (and remember to check the tire pressure) Happy Driving.
-Article by Bill Tucker for Forbes